Welcome to Quickbit Q3 2022 presentation. Afterward, there will be a quick question and answer session. If you wish to ask a question, press zero one on your telephone keypad. To withdraw your question, you may do so by pressing zero two to cancel. Today, I'm pleased to present Anders Jonson, Interim CEO and Group CEO, and Susanne Andersson, Interim CFO. Please begin the meeting.
Thank you, operator, and good day everyone, and welcome to Quickbit's earnings call Q1 for the financial year 2022-2023. On today's call, as we just mentioned, we have our Interim CFO, Susanne Andersson, and myself, Anders Jonson, acting CEO and CEO of Quickbit. Since I am new to the company and its stakeholders since August, I will start with giving you a short presentation of myself. Let me start by saying that I am super excited to be here at Quickbit. From the moment I stepped through the door, I have been greeted by a very professional, motivated, and above all, positive team. When it comes to what I can bring to Quickbit, I have a long and solid background from several different types of companies, where the main theme is emerging markets and startups.
My formal training is in engineering physics, and while I don't think I will have any use for my knowledge in quantum physics at Quickbit, I have a broad and deep understanding of technology while also having business acumen. My focus will be on delivering the product that form the basis of our ecosystem and building a Quickbit that will be a major player on Europe's crypto scene. Now, enough about me. Let's continue with the Quickbit earnings call. This morning, we published our first quarter interim report, July to September 2022, and we will walk you through the key highlights of the quarter, our products, as well as our financials, and conclude with a Q&A session. As for the Q&A session, please be reminded that it will help me and Susanne a lot if you write your questions in English.
Thank you so much for this in advance. Before we get into the presentation, I would like to comment on the past couple of months. Globally, we have seen an increased macroeconomic instability with a continuing increasing inflation and rising interest rates, thus lowering the consumer's purchasing power. However, we are still keeping up our pace to move the crypto adoption forward, and we will continue our persistent work to develop and expand Quickbit further to stay ahead in this climate. With this introduction, I would like to start. Next slide, please. We are now looking at the Q1 highlights. The revenue in Q1 amounted to. The lower revenue is connected to decreased activities from our merchants. We are dissatisfied with the low level in sales.
However, we are addressing the low level of activities and saw an increasing trend at the end of the quarter, which we believe will continue into the second quarter ahead of a busier winter period. Our gross margin came in at 4.2%, which is an increase from 3.7% year-on-year. The margin increase is primarily driven by a favorable product and market mix, as well as cost efficiencies. In August, we acquired two new business-to-business product platforms, which will strengthen our market offering. The upcoming product, Quickbit Checkout, will enable e-merchants to receive payments in cryptocurrency from any consumer crypto wallets. The other products acquired is a new and improved Quickbit Affiliate, which will enable larger volumes in a smoother user experience.
We are now working intensely with our product and tech departments with testing to secure the performance of these products ahead of a broad launch before the end of the year. Regarding new product releases and geographical expansion, we are continuing with our high productivity and efficiency according to plan. In the beginning of the quarter, the Earn Wallet was released. Our consumer offering was launched in Finland in September, and yesterday we released the consumer offering in the Netherlands as well. We are thus progressing steadily in expanding our consumer offering in Europe, now having presence in Sweden, Norway, Finland, and the Netherlands. Next slide, please. We're now looking at our business-to-business section, including Quickbit Affiliate and the Quickbit Merchant product suite.
In the first quarter, our average daily volume came in at EUR 0.7 million, which is the result of lower activity among the merchants explained in previous slide. As mentioned, we are dissatisfied with this, but what is important is that we saw an increasing trend at the end of the quarter that we will believe will continue in the second quarter. During the quarter, we have added two new merchants and reached a total of 84. However, the business volume from each individual merchant varies a lot. Therefore, we are internally evaluating this KPI since we think it might be misleading. Looking at our profitability, we are counting continuing to improve our gross margin over time. Related to affiliate, this is a result of a favorable product and market mix, and we are working hard to keep strengthening our margins.
As we have mentioned before, we will see a different margin profile as we grow our business to consumer segment together with the Quickbit Merchant product suite, and they are reported in net rather than gross. As previously mentioned, we are now with the release of the Quickbit Merchant product suite. The first product, Quickbit Pay, which is developed in-house, is designed for in-app payments through Quickbit App and leverages Quickbit's infrastructure at its core. Through Quickbit Pay, we give our Quickbit App users the opportunity to pay online with the cryptocurrencies available in our app, while e-merchants receive payments in fiat currency. The other product in the merchant product suite, Quickbit Checkout, offers a universal cryptocurrency solution that enables merchants to get paid in a selection of cryptocurrencies from consumers who don't currently use Quickbit App.
Quickbit Checkout is designed to facilitate users to pay online with cryptocurrencies from any crypto wallet. Next slide, please. We are now looking at the business to consumer offering. As we have already mentioned before, early in the quarter, we launched the Earn Wallet, enabling both consumers and business customers to use their crypto as collateral and receiving a yield. It has been launched with a possibility to lend Bitcoin via third party and give app users the opportunity to use our platform to generate non-transaction-based revenues. With the launch of our consumer offering in Finland during the quarter and yesterday in the Netherlands, we're expanding into new markets with our app, card, and Earn Wallet, and we are planning to continue this expansion further in the EU.
The coming launch of Quickbit Pay and its integration with Quickbit App gives us an opportunity to acquire new customers to the app, both as an onboarding route, but also as it enhances the overall user experience. Next slide, please. We are now looking at the Quickbit ecosystem. This slide has been shown before but in a different version, and it displays our product portfolio and how we consider it to make up an ecosystem. However, this picture is slightly updated with regards to our new merchant product suite. Our ecosystem and our review of how all our products align is a fundamental part of our business and vision and how we see the need of our products and services come together. The Quickbit Merchant Suite is designed to service users regardless of their crypto maturity.
We want to deliver a fast, seamless payment experience for any user, whether you are onboarded into the Quickbit ecosystem or not. We want to leverage our ecosystem and the ability to address both the consumer market and business market simultaneously to create payment solutions that are cheaper, faster, and better than the traditional banking solutions still dominating the market. On this slide, we can show how the merchant product suite meets the consumer market with three separate products. One enables users to buy crypto as means of a transaction, one that enables merchants to take payments from users of other crypto services, and one that faces users who are already onboarded in the Quickbit app.
These products also have the ability to market the benefit of using Quickbit and acts as a sales funnel towards users outside of the Quickbit ecosystem. Our strategic target for the coming period is to consolidate our position as a payment service and build our user base, and we will work tactically with the product interfaces you see here to optimize the conversion rate and to engage users looking for better and more convenient ways to pay. With that said, I will hand over to you, Susanne.
Thank you, Anders. Operator, please go to the next slide, number six on revenue and margins. If we start looking on the left side of the slide, the revenue in Q1 amounted to EUR 68.1 million. As Anders has mentioned, we are not satisfied with the sales level in this quarter. The reason for not seeing a growth in the quarter is mostly due to a lower activity level at merchants. However, this has been addressed, and toward the end of the quarter, we noted a rising trend that we believe will continue in the next quarter ahead of the more busier winter season. If we move to the middle graph, our gross margin came in at 4.2%, which is an increase from 3.7% year-over-year and similar to the previous quarter, the fourth quarter.
The increase is primarily driven by our product and market mix, as well as cost efficiencies from renegotiated supplier agreements. As Anders has stated, we will continue our focus on profitability and cost efficiency. Again, I feel somewhat repetitive to what has already been said, but with the new acquired products, our target is to improve both sales and margins going forward. These products will be enablers for these improvements. If we then move to the right side of the slide, looking at the adjusted EBITDA, it increased to EUR 1.1 million, driven by continuous cost efficiency, both, as already stated, within the cost of sales, but also within the OpEx.
It can be seen here that despite higher sales and gross profit last year, we have still managed to improve our EBITDA this year as a positive result of the cost reductions and a more cost-efficient organization. This is actually something very positive worth noting. Next slide, please. We're now on slide number eight, cost and financial position. Again, if we start looking at the left side, our adjusted OPEX amounted to a total of EUR 1.8 million in the quarter compared to EUR 3.1 million last year as a result of the cost efficiency program that has been carried out and still is. The black part of the bar chart consists mainly of external costs, consultancy fees, and staff costs, whereas the blue part consists of variable costs relating to transaction fees or banking fees, if you like.
The volume-based reduction year-on-year is a result of lower sales volume, but also previous work of establishing stronger and more sound relationship with both acquiring banks and commercial banks. The non-volume-based reduction year-on-year is mainly a reduction of consultancy fees and external costs, as well as a reduction of total FTE staff, where staff means both personnel and consultants, and FTE is an abbreviation for full-time equivalent. This full-time staff has gone from 64 down to 60. The personnel costs are roughly at EUR 1 million a quarter. However, please be reminded that the period July-September, our first quarter, is usually somewhat lower due to the vacation period in Europe, where our staff is located. Thus a slight increase in personnel cost can be expected next quarters.
If we look to the graph to the right, our cash position amounted to EUR 3 million at the end of the quarter. The reduction was mainly due to the acquisition of the two technical platforms of EUR 4.5 million, as previously discussed during this call, and also some increased receivables totaling EUR 1.4 million. Our focus in Q2 and going forward is to reduce our receivables and reestablishing a strong cash position. However, I'd like you to remember that Quickbit is a debt-free company with good opportunities to restore the cash position. We will continue to drive our cost efficiency and cost awareness within the company. At the same time, as we still need to invest for future growth, both geographical expansion as well as new products and features, including marketing costs.
With that said, I'll hand back over to you, Anders, for some concluding remarks before we open up our Q&A session. Operator, next slide, please.
Thank you, Susanne. Sorry. Before we go into Q&A, I would like to wrap up with a few comments. First of all, as we have been talking about during the presentation, we are getting closer to the broad launch of both Quickbit Pay and Quickbit Checkout in our Quickbit Merchant offering. With Quickbit Pay, our merchants' customers will be able to benefit from fast settlement, low handling fees, and quick access to cash while eliminating chargebacks. The product will support onboarding to the Quickbit ecosystem, and therefore also serve as a powerful tool for acquiring new users to the Quickbit App. With Quickbit Checkout, users using any crypto wallet and will be able to complete purchases. This will give Quickbit the possibility to capitalize on a larger number of users outside of Quickbit App.
We are also excited to announce that we are getting closer to the launch of a new and improved Quickbit Affiliate product. It's a more robust platform that is based on one of the acquired platform in August. This new product will increase the user experience for both merchants and customers. With upcoming MiCA regulation, we also see a large opportunity to continue our geographical expansion in an even faster pace in the EU. Finally, we have an upcoming annual general meeting, the 22nd of November, with four new board members proposed for election. With that, we'll open up for some questions. Again, please write your questions in English. It will make the Q&A session easier. Operator, please go ahead.
If you wish to ask a question, please press zero-one on your telephone keypad. If you wish to withdraw a question, you may do so by pressing zero-two to cancel. We will now have a brief pause while questions are added to the queue. We have our first question from Hjalmar Bjernström. Please go ahead.
So-
I don't know if the.
Hjalmar, can you hear us?
We cannot hear anything on our end.
Hjalmar, can you hear us?
Okay, it seems like we have some problems with tech, or we can't hear you, Hjalmar Bjernström.
No, we seem to get. Do we have any questions from the mail? Start from that end.
Yes, we have. Shall we take one here starting?
Yes, go ahead there.
Yep. I can start with a question from Adam. "Can you give us a reasonable assumption of the Q2 turnover in line with current Q1, or can we expect a rise? enough cash flow to cover expenses for Q2 and Q3 and also..." Marketing. Sorry, it's jumping around. "And also marketing for merchant." we don't wanna guide, but what we have seen at the end of Q1 is a rising trend in terms of volumes, and that we expect to go into Q2 ahead of the more busier winter season. We do have enough cash flow to cover for expenses the coming quarters. I'll take the next one from here, as they come. We have one question from Adnan.
Any plans on leaving NGM for another list?" I think we had this question up this summer as well, and we are preparing. There are some requirements to do it. It's really a decision for the board to take whether they want to move or change any list. During that time, we are continuously working on our internal processes and routines. So should that be a decision, we are better prepared for it, but there's no such decision as of now. Shall I take one more here coming in from Sebastian? "When you purchased the two platforms for EUR 4.5 million, you were very sure that these platforms would generate a considerable increase of growth in the second quarter." This one we're in right now. Is this something that you're still certain to happen?
Sebastian, at that time, I believe that the only thing we have commented on and stated in all written communication is that we will have initial sales when it's being launched. That's what I think you can foresee. Maybe you, Anders, want to say something, but we are working very intensively internally.
Exactly. I've got a similar question here from Peter Andersson. A lot of question about our acquisitions of the product. I mean, basically as a tech guy, and I guess several of you are also, you know that time-to-market is of the essence, so we made a decision to acquire those products. And we did a judgment that this will shorten the time to market, basically. Regarding revenues and such, we are, as we mentioned in our previous reports, that we are, we use the term soft launching, but we are having discussions with merchants and are expecting to onboard them as soon as we can.
Good. We just had a question from Rob: "Will there be needed?
Oh, yes. "We will see two separate merchant product, Quickbit Pay and Quickbit Checkout. Basically, are they any different or will we market them separately?" Yes, depending on the customer's business and what they want, basically. Would they like to use our entire ecosystem or would they like to get crypto payments from other wallets, basically? Yes, there are two separate streams, but of course they are like connected to our entire ecosystem.
You start with that one also.
Yes. Marketing,
Yep. Question from Theodore.
Exactly. Yes, are you planning to step up the marketing with the launch of Merchant? The answer is yes. Again, we are referring a lot to the ecosystem and the finalizing of this product. We are as eager as you to get this started. Yes, marketing is good. That's it, is our intention.
Um-
It's a bit of repetitive questions here.
Repetitive. I think we already answered to this one. When we expect the acquired platforms to start contributing. Again, like Anders just said, we are testing now and ahead of a broader launch before the year-end. Thereafter, of course, when you're launching, you start from a small level, and then you grow. That is still the plan. Let's see what we have here. Like that. Operator, do we have any questions via telephone?
If you wish to ask a question, please press zero-one on your telephone keypad. Yes. Now we have a question from Hjalmar Bjernström. Please go ahead, Hjalmar.
Hello, Anders and Susanne. Can you hear me?
Yes.
Yes. Now we can hear you. Hi, Hjalmar.
All right. Hello. Thanks for taking my question. First one is on the gross margin. Naturally, like you said, this is the result of product mix, and also, savings initiatives carried out. My first question is, are you confident that you carried out all the savings initiatives? And what could we expect in terms of gross margin improvement sequentially now looking forward?
I think this good work done will continue, and then the exact product and market mix will always depend a little bit. As you know, we have a little bit of higher margins within the EU. Also it's always what do you say? You need to look both on the volume and the margin. Even business with a slightly lower margin is still good business. I mean, that will still add to the gross profit, right? We will continue to drive the gross margin and not really guiding it for the next quarter, but for the long term. Also once we have launched the new products, the technical platform that has been acquired, they will also contribute both to sales and to the gross margins.
Thank you. Second on the Quickbit Pay and the Quickbit Checkout. You mentioned in the report that you believe that these services will add merchants. Should we see this as a net add, or can we see this as a guidance of your expectations of the numbers of merchants looking forward?
A little bit, again, what Anders said in his presentations, I mean, you could say yes. What we've seen when we're talking about the merchants, I mean, we've been adding in the quarter and yet the sales are down. From a KPI, we don't see that this is perfect. We will actually evaluate this KPI and start looking to it and see how we can better help you to foresee the future, so to say. Yes, it.
All right.
Like in general, it will add more merchants, but some of them, particularly for the, I don't recall if you actually put the technical platform there or if it was only pay and checkout, but just some of them, they will be transferred to the new platform. So it's not only adding, it's some also, transferring. So both.
I can just add here, there are lots of questions regarding these, both the ecosystem and the merchant products, and basically a lot of the same questions. When can we expect an increased revenue, basically? Or, will this be a steep and sudden increase or will it be a gradual one? Just as Susanne said, it will be a gradual one. Our strategy is to transfer them basically into the merchant suite of applications which we are talking about.
All right. Thank you. Very useful.
Yes, Hjalmar, do you have any more questions?
No, that's all. That's all on my end. Thank you.
Okay. Thank you.
If you wish to ask a question, please press zero-one on your telephone keypad. We seem to have no more questions from the phone conference. Give the word over to your speakers.
Let us see. Just, I think we still have a few incoming, but I think we have covered the most. Customers online. Do you have an answer to that one? Done. Let me just see. There's some of them along. There are many questions in one. Hold on. That one we have covered. I think we have.
Lots of financial questions.
Yeah, exactly. Well, but yeah. We have a few financial questions coming in concerning our receivables on the balance sheet of EUR 6.5. We have that in three questions, I think. Yes, when I stated that we will work on reestablishing our cash position, one part is actually to try to get back some of the receivables. Discussions are ongoing with customers and partners to this. The discussions are very good, and they are progressing. We will update you when we have something. This is being addressed internally. I think we actually covered most from various. Yeah.
I think it looks like I've covered it all, basically. We can.
Yes. From this side, there's no more questions on the web. Operator, back to you if we have any online.
We have no more questions on the phone conference, so you can go ahead and conclude your call.
Okay.
I think we are finished. Thank you very much, Susanne, and thank you for listening in, everyone. I think this concludes our meeting.
Yes. Thank you so much, everybody.